Payroll Growth Supports December Rate Hike

Economic Pulse
November 6, 2015
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October’s payroll figures easily exceeded consensus forecasts, with total nonfarm payrolls rising by 271,000 and upward revisions to the figures from May and June adding a net +12,000. While employment in financial activities and information were essentially unchanged (adding 5,000 and contracting by 1,000, respectively) gains in the professional and business services category soared, increasing by 78,000—well above the 52,000 increase observed over the past year. Increases in temporary help services and computer systems design jobs were each notable, although part of the strength likely reflected a reversal in September’s below-average figures (Table 1 and Chart 1).

Today’s report provides the “all clear” needed for the Federal Reserve to increase base rates at its December meeting. Average hourly earnings climbed by 2.5% year-over-year—the largest annual gain since 2009—while measures of slack are decidedly improved. As shown in Chart 2 on the following page, the number of people entering the labor force because they’ve found jobs has been steadily rising, while the number of people leaving the labor force due to job loss has been declining. Both measures are signs of health in the job market, as are other metrics: the fraction of part-time employees working part-time due to economic reasons has fallen from a cycle high of 33% to 21%, while the median duration of unemployment has declined from 25.2 to 11.2 weeks. With domestic equity markets at record highs and even China’s stock index back in “bull market” territory, the Fed has little to fear by starting to tighten—albeit slowly—before the end of this year.

Table 1. Monthly Change in Office-Using Payrolls by Category (000s, SA)

Table 1. Monthly Change in Office-Using Payrolls by Category (000s, SA)

Chart 1. Office-Using Employment and Total Payrolls, October 2007 – October 2015 (Seasonally-Adjusted, 000s)

Chart 1. Office-Using Employment and Total Payrolls, October 2007 – October 2015 (Seasonally-Adjusted, 000s)

Chart 2. Monthly Labor Force Flows:Fewer Unemployed Leaving Labor Force and More Moving From “Not In Labor Force” to Employed

Chart 2. Monthly Labor Force Flows:Fewer Unemployed Leaving Labor Force and More Moving From “Not In Labor Force” to Employed